Every new year is a new financial calendar year in Germany, which many expats may note is different to their home countries. As with every year, we at Kontist want to make sure freelancers and the self-employed are totally prepared for year, deadlines and their tax responsibilities by giving you a full overview of the German tax calender for 2022.
This blog post will summarise and highlight everything freelancers and the self-employed need to have in mind, starting off 2022!
On the 20 December, 2021 the German Ministry for Finances published a complete guide to the upcoming changes that would come into effect on 01 January 2022. Let’s get started with a quick review of their official announcement, obviously focused on the self-employed or those with a mix of employed and freelancer activity.
The basic allowance will be increased.
The so-called subsistence level must be tax-free for everyone. For this, there is the basic tax allowance for income tax. The federal government is taking into account the increased cost of living in Germany. The maximum amount for the deduction of maintenance payments will also be increased accordingly from January 1, 2022.
Salary increases/ income increases will not be impacted by taxes rises in certain cases
A salary increase, i.e. a wage increase, should also make itself felt in the purse of employees. Therefore, the income tax rate for the year 2022 will be adjusted to offset the effect of the so-called "cold progression". That means: wages and salaries are not taxed higher, provided that their increase only compensates for inflation.
Tax-free bonus can still be paid
In order to take into account the often more difficult conditions in the pandemic, the federal government has given employers a special allowance for their employees: Bonus payments (grants and support) of up to 1,500 EUR have been available since March 1st be paid out tax-free in 2020. This rule applies until March 31, 2022.
Corona aid is being extended
Companies and self-employed persons can take advantage of extensive support with the extension of corona aid until the end of March 2022 if they suffer from corona-related restrictions:
- Bridging aid IV for companies and self-employed people: up to 90 percent reimbursement of fixed costs
- Improved equity subsidy for companies that are particularly hard hit by corona-related closings
- Restart aid for self-employed people: continue to receive up to 1,500 euros per month in direct grants.
In addition, significant special regulations for short-time work allowance apply until March 31, 2022. In addition, the application deadline for the KfW special program has been extended to April 30, 2022 and the applicable credit limits have been increased again. This means that the program is available to companies of all sizes and from all sectors to cover their liquidity needs. For more information on Corona help, please look to the Kontist blog.
More time for planned investments
If smaller companies are planning to purchase machines or similar within the next three years , they can use the so-called investment deduction amount to deduct part of the costs when calculating profits. Due to the corona crisis, however, many companies were unable to invest as planned, which is why they were threatened with retroactive processing of the investment deduction amount after the three-year period had expired.
An extension to the end of 2021 has therefore already been agreed for preferential investments with a deadline until the end of 2020. This deadline will now be extended by another year to the end of 2022. In this way, companies can catch up on their investments without negative tax consequences.